Q2 2023 WSP Global Inc Earnings Call
Okay.
Good morning, everyone and welcome to the type of U S. P. S second quarter 'twenty 'twenty four results conference call.
I would now like to turn the meeting over to Quintin without Investor Relations. Please go ahead Mr. Weber.
Good morning, we hope that you are doing well and thank you for joining our call today, we will be discussing our Q2 2023 bear permits will followed by Q&A session. Joining us this morning are Alexandre.
And now let me show our CFO .
Note that this call is oxide system, both on our website.
During the call, we will be making some forward looking statements.
Results could differ.
Okay.
We undertake no obligation to update or revise any of these things.
Relevant factors that could cause actual results to differ materially from those forward looking statements are listed in our MD&A for the quarter.
'twenty, three which can be found on SEDAR and on our website. In addition, during the call we may refer to certain non <unk>.
Measures. These measures are also defined in our MD&A for the quarter that ended July one 2023, our MD&A includes reconciliations of non <unk> measures to the most directly comparable.
Arris measures.
<unk> believes that these measures provide useful information to investors regarding the corporation financial condition and results of operation as they provide additional metrics.
Performance.
These non <unk> measures are not recognized on the ramp.
And not have any standardized meaning prescribed underwriter and may differ from similarly named measures reported by other issuers and accordingly may not be comparable.
First should not be viewed as a substitute for the related financial information prepared in accordance with <unk>.
I will now turn the call over to Alex.
Thank you Kyle and good morning, everyone to start I want to highlight the following three points first.
I am very pleased with our strong performance in the first half of 2023.
Based on our results to date backlog expanding platform and the volume of opportunities. We are witnessing in the market. We are significantly increasing our financial outlook for the remainder of the year in comparison to the previously disclosed midpoint.
Lastly, we are at the midpoint of our 2022 2024 strategic cycle and I am very proud of our accomplishments. So far I will expand on this later, but for now lets get back to our results.
Since the beginning of the year, our organic growth has continued to surpass expectations and was driven by strong tailwind across our markets all of our key regions and sectors are contributing to it too and benefiting from this dynamic with.
Our global reach multidisciplinary expertise.
Lynn and focus WSB is uniquely positioned to deliver the work required that will lead to a more sustainable and resilient world.
Given our strong organic growth and the contribution of recent acquisitions revenue increased by approximately 30% in the first half of the year as compared to the same period last year and represent one $6 billion of additional revenues.
We expect that our prospects for the rest of 2023 and beyond we will remain equally strong.
Our order intake in Q2 was the highest recorded in a single quarter with more than $4 billion and our pipeline of opportunities remains strong.
Our backlog stands at more than $14 billion. Despite consuming a significant portion of our order book through high revenues. This is a record high level for WSB.
Since the beginning of 2023 and the U S. Specifically, we recorded an increase of over 20% and contract awards not yet included in our backlog.
Which we commonly referred to as our soft backlog.
Year over year, the increase represents 40% and reflects a rising need for improved infrastructure and for our expertise, which is a similar trend we see globally.
Before covering the key highlights of the last quarter I will turn it to over to Alain who will provide further details on our increased outlook.
Alex the increase in our financial outlook is driven by the following three factors.
First a higher than expected organic growth in the first half of the year.
The contribution from our recent acquisition and lastly, the positive impact of our ongoing margin enhancement initiatives.
Net revenues are now expected to fall in the range of $10 $7 billion to $11 billion. We anticipate net revenue organic growth calculated on a constant currency basis to range between six and 9%.
There is continued strong momentum across our key regions, Canada reinforce its backlog with recent major win the U S continue to deliver solid growth and the pipeline of opportunities is healthy.
EMEA led by the U K, which has delivered double digit organic growth in the last two years continued to delivered solid result, combined with Sweden announced performance versus prior years. Finally, our APAC region led by Australia, and New Zealand sustained a strong level of organic growth and <unk>.
Robust backlog.
Adjusted EBITDA is now expected to range between $1 nine and $1 $93 billion, the midpoint of our targeted range, representing an anticipated 17, 6% EBITDA margin.
<unk> five basis point higher compared to 2022.
This represents the higher end of our yearly strategic EBITDA margin growth ambition of 30 to 50 basis points. Furthermore, at the midpoint. This assumes a lift of expected adjusted EBITDA of $115 million versus our previous financial outlook. It.
The acquisition of caliber and L. G T as well as the recently announced divestment of late that services, our lbs, which Alex will expand upon shortly.
Thanks to the passion and dedication of our people were moving into the second half of the year with confidence and a strong focus on diligently executing on our plan back to you Alex.
Our increased outlook is a reflection of <unk> unique position in a thriving market and our ability to achieve our financial ambitions on the M&A front, we have continued to push forward and core sectors and expand a growth area.
During the quarter, we announced the acquisition of <unk>, adding 150 employees to our workforce and further positioning <unk> as a key player in the kickbacks building sector.
<unk> is recognized for its cutting edge expertise specific to data centers and critical infrastructure, which contributes directly to our global capabilities.
In addition, we completed a caliber transaction and expanded on our Australian workforce by 800 professionals. We are now established as a tier one player in Australia. According to the mining majors, which confers access to the most complex and strategic projects and underpins via organic growth.
Since the beginning of the year, we have welcomed 1700 professionals from four acquisitions that are expected to generate approximately $400 million.
An annual net revenues and complement our global and diversified platform.
We continue to move ahead with the integration of prior acquisitions, including the environment and infrastructure business of John Wood Group, which was our largest acquisition in 2022 and is progressing as expected. We are leveraging this strategic addition, engaging with new clients and offering our combined ones.
A wider range of services.
BG consulting engineers continues to deliver as anticipated with the resulting benefits and has had at scale to our business in Switzerland and France.
We are capitalizing on WSB strengths in Europe with growth opportunities, notably in renewable energy water and.
And environment as well as buildings.
Earlier this week, we completed the sale of lbs diverse or a global project management company backed by kids with capital Management L.
<unk> joined <unk> through the 2018 acquisition of <unk> and at the time represented less than 10% of Louis Berger profit the <unk>.
<unk> team delivers operation and maintenance services to the U S military state and local transportation clients.
We are confident this divestment is the best way to ensure the long term success.
Specialized services business and it'll aligns with our strategy today.
Today I also want to take a moment to share two of the industry distinctions we received this quarter.
<unk> was recognized as one of Canada's best 50, corporate citizens by corporate Knights for the third consecutive year.
This highlights our leading scores and environmental metrics sustainable investment diversity.
And we were rated as a leader in climate change and the study conducted by <unk>, an independent research firm.
Additionally, ask you updates concerning recent project wins.
In the U S. WSB has been selected as the professional engineer for the design of the Sunrise Wind farm.
<unk> U S offshore wind project converter platform platelet slated I am sorry to utilize high voltage direct current technology or HV DC. Once completed this offshore wind farm is set to power 600000, New York homes.
And Canada, WSB delivering the cement industry very first full scale carbon capture utilization and storage facility in Edmonton, Alberta. This.
This project will capture emissions from the cement production facility as well as the associated combined heat and power plant to built and the city is northwest. The project aims to capture at full scale 1 million tons of carbon dioxide annually.
In Australia, we continue to support the energy transition and are working on a clean reliable and resilient electrical supply for communities in New South Wales WSB is working to provide services for the <unk> Super battery, which will represent the world's largest grid scale.
Battery.
We are assisting Microsoft reaching its sustainability commitments and we are jointly developing and evaluation framework to allow vulnerable communities to capture the benefits of renewable energy projects. This work was recently recognized by environment analyst and <unk>.
Further highlights wsb's capabilities in the Green energy transition.
Lastly, I am also impressed by our team's climate resiliency capabilities WSB was recently selected by the New York City housing authority to design, an innovative multi functional storm water infrastructure intended to reduce flawed vulnerability caused by intense rain storm.
<unk>. This is known as cloud burst infrastructure in New York City is the first in the U S to adopt that to <unk>.
<unk> comes from Copenhagen, where W. Speed designed the first such project and created the very first climate resiliency neighborhoods we.
We are confident this contributes to influencing that next generation of sustainable urban infrastructure and addressing water related challenges.
Water it touches all of WSB core services and represents over $1 billion in annual gross revenue in 2022.
Water capabilities consists of nearly 5000 experts spanning over 40 countries, who focus on delivering future ready solution to preserve and manage water for generations to come.
Now over to you align for more details on our financial performance in Q2, Thanks, Alex for the first quarter revenues and net revenues reached $3 6 billion and $2 7 billion up 31% and 30% respectively compared to the second quarter of 2022.
We delivered net revenue organic growth of nine 3% in the quarter attributable to all reportable segments with growth seen mostly in the USA, Australia, the U K and New Zealand are.
Our backlog as of July one 2023 remain robust and stood at $14 $3 billion, representing 12 months of revenue with a three 9% organic growth compared to December 2022.
The pipeline of opportunities remains strong across all our regions move.
Moving onto profitability adjusted EBITDA in the quarter stood at $462 million compared to $352 million in the second quarter of 2020% to 31% increase.
Adjusted EBITDA margin increased to 16, 9% compared to 16, 7% in the second quarter of 2022, an increase of 20 basis points attributable to our ongoing margin enhancement initiatives.
The quarter adjusted net earnings stood at $195 million or $1 56 per share. This is an increase of $41 million and 26% respectively compared to the second quarter of 2022.
Cash inflows from operating activities reached $60 million and the six month period ended July one 2023 compared to $42 million in the first half of 2022.
The improvement is mainly attributable to the increase in adjusted EBITDA free.
Free cash outflow of <unk> $198 million for the six month period ended July one 2023 and will continue to aim for a 100% conversion of free cash flow to net earnings.
<unk> aided in previous quarters, our cash taxes higher than in previous years, mainly due to changes in tax regulation in the U S relating to research and development.
For Q2, 2023, we disbursed $134 million of taxes and more than $200 million in the first six months of 2023, almost 90% $90 million sorry more than in the prior year and.
In conclusion, I am very pleased with our financial performance as we delivered another strong quarter, which surpassed expectations now back to you Alex.
Thank you Elaine.
I firmly believe that wsb's favorably positioned to continue to successfully capture market opportunities and deliver on our three year strategic ambitions as I mentioned in my opening remarks, we have reached the midpoint of our strategic cycle and I am proud of our achievements to date.
Allow me to cover three of them in further detail.
First on growth. Our stated 2024 objective is to increase our net revenues by 30% and our adjusted EBITDA by 40% based.
Based on our revised outlook for 2023, we expect we can achieve these targets one year one full year earlier.
Indeed at the midpoint of our financial outlook.
Revenues and adjusted EBITDA are expected to increase by approximately 40% and 45% respectively.
This would represent approximately $3 billion of additional net revenues and almost $600 million of additional EBITDA.
<unk> to the level of 2021.
Second on profitability based on our revised financial outlook, we are expecting to deliver an adjusted EBITDA margin of 17, 6% in 2023 up 80 basis points.
<unk> 2021.
This performance is in line with our strategic ambitions to increase our adjusted EBITDA margin by 30 to 50 basis points per year between 2022 and 2020 for this.
This improvement is consistent with our culture of continuous improvement and our solid track record.
Indeed, when compared to the beginning of our previous strategic cycle. Our expected adjusted EBITDA margin for 2023 would be 300 basis points higher than in 2018, an average improvement of 60 basis points per year.
Lastly on M&A.
We deployed nearly $3 billion since January 2022 to complete and integrated.
And take rates 11, strategic acquisition bolstering, our expertise and directly contributing to the quality and the diversification of our platform.
As stated before M&A continues to be our preferred option to deliver shareholder value.
Thanks to the dedication and expertise of our people, we continued to build a stronger business delivering on our ambitions with focus and discipline.
Today, I see uneven care path to reach our vision on Vela in 2022 to double in size and deliver an adjusted EBITDA margin above 20% on that note. We will now begin the Q&A session. Thank you.
Yes.
Thank you Sal to ask a question you will need to Presto, London, one on your telephone and wait for your name to be announced to withdraw. Your question. You can please press star one again once again. Please press star one on your telephone if you have any questions I'll comment and wait for your name to be announced.
We are now going to proceed with our first question.
And our question is coming from the line of Yuri Lynk from Canaccord Genuity. Please ask your question. Your line is opened.
Good morning, guys and congratulations on a nice quarter. Thank you Uri.
Just on the margin expansion topic.
In the first half of this year, it's been a bit muted about 10 bps, but your new guidance.
Implies over 100 basis points of EBITDA margin expansion in an H two of this year versus H two of last year. So.
Whats.
Driving that and can you at a real basic level kind of split it between gross margin and <unk>.
<unk> SG&A leverage.
Sure. Thank you Yuriy so.
First off.
As we publish our initial outlook we will already.
Driving to increase our margin by 50 bps.
To 17, 5% in the plan.
Was to improve our margin and as we've mentioned before your readers.
A whole list of things, we could do to drive margin upward and as Alex mentioned before we've been doing it for a long time.
So the plan is progressing.
As we anticipated it.
For the reminder of the year, we will continue to push forward on different initiative and a big one is obviously productivity.
Working on providing the best tool to our people.
Which which has obviously a big impact on gross margin.
And continue to drive also.
<unk>.
SG&A costs.
By leveraging better tools and.
And improving overall our efficiency. So we feel confident about the increase margin that's projected for each initial look here in the past.
This year is fairly and actually very consistent with.
Our past performance typically H one tends to be.
Bit more muted.
Given that they are a smaller quarters.
And then we see during summer time.
Activity is picking up where we can definitely leverage our fixed cost base. So so I think.
Perhaps.
Scale.
Improvement is a bit bigger than what you've seen in prior years.
But directional it's very consistent.
Yes.
The acquisitions that you've done since the beginning of the strategic cycle or.
Are they.
Similar similar margins are they are they are margin accretive to your to your mix similar margin profile.
Yes.
But the cost synergies.
Something that perhaps should have mentioned.
And our.
And my remark, but the cost synergies.
We are able to generate is going very very well as well.
So I think we are seeing in all fairness a bit more cost synergies that we were anticipating.
During due diligence.
Number one.
And then the performance.
The companies that we've acquired.
<unk> is also up to bar, if not a bit better than what we were anticipating in the <unk> space actually very consistence with our legacy business.
Which in the first quarter perform.
The first half of this year performed better than what we were anticipating I think Ive said in Q1 that we were cautiously optimistic for this year.
Now we are optimistic for this year.
Yes.
Okay, I will hop back in the queue. Thanks, guys. Thank you.
Thank you and now going to proceed with our next question.
And the question has come from that I know Jacob <unk> from CIBC. Please ask your question.
Good morning.
Good morning.
I had a question on the.
The revenue guidance.
Maybe just talk a bit about which regions are driving this is this.
More Americas specific or is it across geographies and then.
How much of this improvement in organic growth is.
JA related.
Yes.
This one up.
It's across the patch Jacob I think we are seeing better performance there.
Then what we were anticipating at the beginning of this year essentially everywhere with the exception of mainland China.
Where I mean, I think it's widely recognized that the prolonged.
Lockdown habits.
Its effect and impact.
On the business, but we need to remember that our entire Asian business is less than two.
Two 8% of our profitability. So so at the same time I think.
We need to be mindful of this we're not concerned by it.
Any comments about the the benefit of the jewelry.
When does that rollout is that kind of an end of 'twenty three story or is that really starting to kick in now.
It certainly has.
Positive tailwind.
Jacob to our business.
The flow of fund is continuing to progress.
When is it going to peak.
That's a big question, but it tends to be.
More towards 2020 for 2025, but clearly direct impact on our growth and also in direct impact on our growth also in the fact that.
I think it provides confidence to our public sector clients to fund more project given.
What's been announced so overall very positive tailwind for the U S business and you've seen you've seen the growth in since the beginning of the year in the Americas. So we're very happy with the performance so far.
Maybe just one quick one.
Going back to the previous question about <unk>.
Youre talking about cost synergies what are you doing differently to drive those higher cost synergies.
I think I think Jacobs its experience.
I think we are.
<unk> improving as we integrate businesses I think you've heard me, saying that before I have always said that I believe we are better integrator.
And we are acquired.
And I think.
Yes.
Combined I mean, we are we are continually improving our processes and I just feel that.
Given the platform that we have in the hubs and the strong hubs that we have and in most of our regions. I think we are in a position with our local team to do a very fine job on the integration front.
We'll leave it there. Thank you. Thank you thanks.
We are now going to prestige with our next question.
And the question is come from the line of <unk> Khan from RBC capital markets. Please ask your question.
Great Thanks, and good morning.
What are the trends we've noticed across the space is that the organic trends are those organic growth numbers are getting sequentially higher I guess.
So when you balance that against labor, which we haven't heard about for a while how are you.
The industry I guess managing through the labor situation and as it relates to Dolby ESP.
Are there any regions like the U S, where it might be a little bit tighter more competition for talent just trying to understand how you are balancing the labor needs amidst this demand environment.
I think our score is improving on that front.
Bye.
Look at our acceptance rate that's going up.
Our turnover has gone down significantly over the last 12 months I would go at.
I would suggest as far as 500 basis point. So we have seen a significant reduction in turnover in.
An increase in that and acceptance rates.
And of course inflation is there in this persistent.
But at the same time I think we have been doing a very good job at.
Overcoming this.
The increase in margin profile is a testament of that.
Okay, Great and then maybe another one for you Alex on the M&A front, you've been pretty active with small to medium sized deals recently.
Just curious what youre seeing on the M&A front higher targets.
Are those conversations going with potential targets, what are sort of the multiple expectations because it feels like.
A bit of a lull and larger scale deals kind of over the last 12 months just across our broader industries. So just curious what youre seeing out there in your conversations.
Look we continue to have informal and more formal discussion with a number.
Eric.
Peer players.
Having said all that I think we haven't seen a real reduction in valuation expectations from potential sellers.
And I think it's a reflection of what's happening also in the public market.
But we have been extremely disciplined.
And in a time of high inflation and high interest rates.
We have found that.
We were able to complete the acquisition with mid size and smaller size transaction that were.
Actually very accretive.
We were able to pay a very reasonable price for those businesses and that translated and very accretive deals for our company. So so as long as I see that that's this formula is working well for us we're going to continue to do that.
We're obviously still very much open for business for larger sized deal, but as I stated before it needs to be accretive day one.
It needs to make sense for our shareholders and if I feel it does makes sense for our shareholders. We will pull the trigger but if I feel that we need to be a bit more patients. We will also.
But in the meantime, we have been very active.
The first half of this year.
And I expect us to continue to be active between now and the end of our strategic cycle.
Okay, and maybe a quick one for <unk>, if we can maybe get an update on the ERP rollout and where you are and.
What's sort of implementation plan is for the rest of this year in terms of geographies.
Alright.
The rollout in Canada has completed so that is behind us and it's going well.
The.
The schedule for the next region is to be done with.
The U S and the UK, so two very significant rollout.
In the beginning of 2024 so.
So that's the plan. So we have teams that are currently devoting.
A lot of effort and passion to.
To move this project forward, which.
If you look at it.
From a coverage perspective, once we have Canada UK U S done we'll have a very sizable portion of our EBITDA finally under this new system.
Early in 2024.
<unk> well.
Alright, thank you.
Thanks Deborah.
We are now going to take our next question.
And the question comes from the line of Chris Murray from ATB capital markets. Please ask your question.
Thanks folks good morning.
Good morning, Tony.
Maybe turning back to the revenue and maybe margin piece of the story.
I know you've talked a little bit about productivity and some other cost things around.
Integration, but just sort of wondering about pricing.
And what did you guys have seen in the marketplace with pricing with yourself and a lot of your peers seeing such high levels of demand right. Now are you able to capture either abnormal pricing or is there something going on and maybe some of the acquisitions you've done previously that that allow you to generate better quality revenue.
It's probably the latter rather than the former does nothing abnormal other than the natural evolution of our brand awareness.
And the brand that we're building with within the industry I think we are.
<unk> is known to tackle.
Complex projects.
We are known for our deep expertise, we're known for the expertise of our brands, we bring to our clients.
And as a result of this I think we are able.
To be rewarded for the work that we provide in <unk>.
It's just a natural evolution of where we stand as a business and also.
The fact that our all of our sectors are coming together.
Hi.
I think I talked about a number of projects today.
My remark I mean this is just not one sector working on one given projects you are seeing a number of sectors working together and I think that has been a very successful ingredient of our.
Our recipe.
And we're going to continue to do that.
Okay. That's helpful.
And then Alex the other the other.
Kind of question for me you started to make some comments about soft backlog growing.
I think you mentioned in the number of 40%.
Can you talk a little bit about what exactly is going in the soft backlog and is that a function of the type of work Youre doing right now and I know you've talked about like hard backlog right now is about 12 months.
Work, but which itself historically high.
But with soft backlog out there.
What are your thoughts around converting that to hard backlog.
And.
Does that end up at some point at that rate of growth extending your backlog duration even further.
Yes, the $14 billion of hard backlog is the way we account for it is very conservative.
And today I just wanted to give you a flavor as to what.
What goes into the soft backlog, but I will turn to Elaine.
Perhaps can provide a bit more granular details as to what we mean.
By soft backlog in the Master service agreement that we have and things like that so the soft backlog.
Chris is.
Is essentially job that we won so we were allocated the job by our clients.
But we're missing.
Funding essentially our client is missing funding confirmation.
Yes.
The most typical reason why things are in soft backlog.
And once we have the funding confirmation then it makes its way to a hard backlog and Alex is right where.
The way we deal with our backlog is conservative so we wait till we have at absolutely every single things confirm it on paper.
Before we included in our backlog and obviously, we scrub our MSA every time there is <unk>.
Project that comes under an MSA then.
It gets into hard backlog.
Before that we don't we don't estimate the complete where that could come under an MSA. So we are being conservative in our backlog story.
Okay.
But I guess as it is is the msas or the soft backlog is that coming from any sort of new areas or is it just kind of typical as just kind of scaling with the rest of the work that <unk> been doing.
It's representative of the kind of work we do in the U S.
So theres nothing particular in there.
And to your point on the length and number of months that our backlog represent.
Obviously, it's a mix of many things many type of contract many duration.
So the 20 or 40% that we alluded to doesn't mean 20 or 40% organic growth in next year. So there's some programming that are multi years.
So that's that's the way you need to look at it and said this.
Currently and in simple terms.
Times are going to have a multiyear project.
With the multi phases and often time clients will only accruals one or two phase in the project we have been awarded the entire project.
But.
Funding is secure for phase one, let's say with phase two of the project well. We are only going to include the phase one of the project, even though we have been awarded.
Entire project because that's the way to clients is funding it and the way it's being prepared to us. So I think thats another way of looking at the software so as the hard backlog, but I thought today would be important to provide you with some color that.
Even though we're very conservative on the heart.
Obviously, the source is growing rapidly.
Alright Thats helpful. Thank you.
Thanks, Chris.
We are now going to proceed with our next question.
And the question is come from the line of Ian Gillies from Stifel. Please ask your question.
Good morning, everyone.
Morning Ann.
The first topic I wanted to hit on was employee utilization in some of the tools, you're intending to use in the future.
To improve that because I know, that's a pretty important area for margin expansion.
The second part of that is weather and also contemplates the increased use of call. It work centers in international jurisdictions to help elevate that margin.
Yes.
The first topic I think we.
There's really nothing new in were not necessarily using any new tools at this point in time obviously.
While we have our new platform I think this will be an incredible powerful tool.
And we will have just in time.
And then.
Any given countries.
Ization of our people and how we can mobilize mobilize people.
But I just think we are.
<unk>.
Operating in a very dynamic environment and I've talked about a few moving parts today during my remark I mean in answering questions. The fact that.
Yes.
Acceptance rate is increasing that turnover is decreasing.
The fact that our backlog is increasing I think.
Managing productivity as Martin art than a science.
And I think we have been if last year, we have been applying ourselves.
To get people in the door to cope with increased demand for our services.
This year, we are optimizing our workforce and making sure that we utilize the people.
More optimally.
If that makes sense. So so the marching order for 2023, ive been to really making sure that.
We optimize our.
The workforce that we have and make sure that we're very efficient and run a tight ship as.
As we progress into the year and it's been it's obviously being paying up for us at this point in time.
No. That's helpful. And then the second item I was hoping to hit on what <unk> got I forgot your second piece.
The second piece, yes.
Yes can you repeat it for me. Please yes I was just curious as to whether you are contemplating the use of work centers in international jurisdictions fit Marriott It may have.
<unk> may help with margins.
Well.
I think for us.
They always go back to this.
It's not so much the use of complementary resource Center then the collaboration that we foster within the company.
We are for instance.
Completing and we'll be completing very soon.
The booklet that Metro project and the design of the Bogota Metro project, and we have an incredible transportation team in Colombia, right now and.
And this project will be coming to an end, but already we are using in utilization utilizing I'm sorry that this theme on the other projects.
Around and across.
No.
A number of sectors.
Around the world and I think Thats, the beauty of the model and the beauty of the network that we have.
We are in a position to tap in resources wherever they are located.
To support the projects I, just referred to in that regard that metro.
Metro we have teams from the UK from Canada and from Latin America working on that Joe.
And as I said, I think thats the beauty of us.
Of our of our network and the beauty of WSB model.
So indeed, we are tapping in the resources available around the world and geography is not really a niche initiatives. So if we have <unk>.
Available in Manila in India, and Poland and Colombia.
Or in.
In the developed world, we are going to utilize those resources.
Okay.
That's useful.
The other thing I wanted to hit on the commercial real estate business, while I know it isn't a big portion can you maybe give a bit of an update of what youre seeing there.
And perhaps how you contemplated.
That as you built out the new updated organic revenue growth forecasts.
Look it's.
It's been a very strong market for us that building sector.
Today represent <unk> of our total business.
And growing in absolute terms and in percentages. So so we're not shying away from that sector will continue to drive and capitalize on this sector.
We're pleased with the way things are.
Our evolving at this point in time and then in other sectors.
Buildings, I think we were seeing incredible growth right now.
Health care being one.
Mission critical work in data center being another.
Without naming names one of the large tech companies.
That we were talking to not so long ago just that.
Just telling us that they intend to build.
<unk> hundred 20 additional data centers worldwide.
For the next 12 months, that's one data center every three days and we are under MSA.
Yes.
With this player.
In Taiwan in Europe , and U S and in Canada. So so for US I mean this is.
Very very very.
Promising so so we're extremely pleased with them.
Okay. Thank you very much I'll turn the call back over.
Sure.
We are now going to proceed with our next question.
And the question is come from the line of Greenwald Quaggy from additional debt capital markets. Please ask your question.
Good morning, everyone and congratulations again for the good quarter. Good just to come back on the previous question about the 40% increase in soft backlog I was wondering if you could provide more granularity about whether it's driven by a particular region and how does the app.
So luke value compare to historical level.
Wondering you could provide you greater visibility than usual.
It's Ben.
<unk>.
To be more specific.
More around North America, and actually more precisely the U S.
We have seen a sharp increase.
And then just the resulting effect of <unk>.
I think multiyear projects I think I gave an example about the multiple phases of any given project.
We have been awarded a number of projects that are multi year projects in the U S.
And the resulting effect of that.
And given that we're very conservative in the way we account for hard backlog, we have seen an increase in the backlog, but this is a good indication.
Im not discounting and this is a good indication that we are winning work.
And we are.
Yes.
It looks promising with what we know today, but until its into hard backlog.
We're leaving it adapt at source until it's secured unfunded.
Okay, that's great color and just curious about the head.
Headcount what are.
Do you have enough resources headcount to deliver on this higher growth objectives.
Hello.
It's a constant challenge I'm not going to lie I think I just talked about the sharp increase in <unk> backlog in the U S. So for the remainder of the of the year in the U S. More specifically I think.
Again, the marching order is really to reduce the time before between the time, we open a position and sign up.
Professionals to join our firm I think that the goal is really to reduce the time for that.
Timeline.
Because yes, indeed, I mean, it's a very dynamic.
Yes.
Dynamic.
Market.
And we want to be ahead of the curve. So so I think we're going to remain quite high.
Focus on this for the remainder of this.
This year.
Okay, that's great and when we look at your.
EBITDA margin target this year at the midpoint implies almost.
50 bps improvement versus last year.
Just wondering going forward is.
Is 50 bps, a year is kind of a sustainable level.
Are the key levers going to be about the same going forward to drive margin improvement.
Thanks.
55 basis points to be more specific bandwidth for this year against.
Against last year.
Look if you look back over the last five six years.
The track record has been to be from one.
One quarter to the other from one year to the other anything between $30 <unk>.
Basis points.
So.
I think that's probably a fair estimate.
Going forward and for the remainder of our strategic cycle.
Post strategic cycle will need to update you with the new one.
But certainly between now and the end of 2024, our goal is to remain within the ballpark.
Okay perfect that's great color thanks for the time.
Okay.
We are now going to proceed with our next question.
And our question comes from the line of Devin Dodge from BMO capital markets. Please ask your question.
Thanks, Good morning.
So I wanted to come back to some earlier questions on labor.
Typically the turnover.
So when we think back prior to the pandemic WP had been targeting I think around 12% voluntary turnover now obviously there are broad.
Increase in turnover across the industry in 2022 kind of defer those plans, but when you look out over the next few years do you think that 12% voluntary turnover target is still an achievable goal and if so what are the levers to get there.
Yes, we are.
We're not.
Exactly back to historical level at WSI.
I, just I just want to remind the audience that.
During the last plan our goal was to get to 12% that we were just there.
Slightly above that so shy of the 12% so.
So clearly we're not back to historical level right now.
As it relates to turnover, but we've seen a sharp decrease in turnover so to answer your question yes.
In the next few years, I think 12% is achievable and yes.
That's something that we should aim for.
Okay. Thanks, correct, Okay, and then maybe just a quick one on the back of the divestiture of <unk> services.
Are there other opportunities to prune the portfolio from services that arent part of that core engineering design and advisory services offering.
Look we.
We typically buy more than we sell.
That's a fact of life, but at the same time, we're not afraid to chop demise or platform. If we think that there are some assets that are not core to our strategy.
<unk>, we just felt that another buyer would be a better home for this asset.
Frankly from the time of the acquisition that we signed the transaction I've always had in the back of my mind that.
<unk> is something that we would want to sell enough float.
But just we just wanted to refine the business.
An increased performance and profitability before selling it.
Okay. Thanks for that congrats on the good quarter I will turn it over thank you so much.
We are now going to proceed with our next question.
Okay.
And the question is come from the line of Jonathan Lamers from <unk> Securities. Please ask your question.
Thank you good morning, good morning.
<unk>.
Just following up on the questions around the 2024 strategic plan targets and how those tied to the 2023.
Items.
I know you've laid out.
That those targets.
Had embedded 32.
The 50 basis point annual margin improvement.
Just given.
And given that the recently acquired businesses are performing in excess of your expectations.
Does that reduce the.
The amount of additional margin that we can capture.
From those three year strategic plan initiatives.
No not necessarily I think the outlook, we provided for the plan.
As I think if my memory is not failing me as EBITDA margin between $17 $518.
Percent EBITDA margin.
Already this year, if all goes well, we don't see anything.
The horizon that would prevent us from achieving that we will be within that.
That does that.
Ballpark.
Already by the end of this year, we feel we will be already within the ballpark.
24, the goal is really to continue to thrive and to improve on what we will have realized in 2023.
So.
I'd say that.
With what we know today and the plans that we have in place.
We clearly anticipate margin improvement next year.
The fact that we've.
Certainly when we put this plan together, we had not planned for.
5%, 6% inflation rate in <unk>.
5%, 6% interest rates.
Despite all of this.
We are taking the means to generate margin improvement in line with what we had projected.
Thank you would it be fair to say that the outperformance of the recently acquired businesses.
Amit.
Sales.
Right.
I'm sorry, the line the line wasn't good.
So if you could get closer to the microphone.
Don't hear you well can you repeat the question.
Sorry about that my question is.
Much better is it fair to say that the outperformance of recently acquired businesses has been more on the revenue generation side.
I would say that generally speaking and what I mean, when I said in the remarks that they are performing better than what we were anticipating in due diligence.
To be very conservative.
When.
We look at the price, we're willing to pay for an asset.
I think I think just generally speaking right now all of our acquisitions have been doing well on the top line and as well on the bottom line.
Thanks for your comment.
Thank you.
We have no further questions at this time I will now hand back to you for closing remarks.
Well. Thank you very much for attending this call again, we are extremely pleased with the performance of WSB in Q2 and in the first half of this year and we intend to work very hard to.
To generate equally strong results in the remainder of this year. So on that note I would like to thank you and look forward to engaging with you.
During our Q3 call have a great day bye bye.
<unk>.
Ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect. Your lines. Thank you and have a good day.
Okay.
Okay.
Okay.
Okay.
Okay.
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